LETTER TO SHAREHOLDERS
Biel / Bienne, 14 July 2020
SWATCH GROUP: Half-Year Report 2020
-After a strong January with an operating margin of 21.4% in the Watches & Jewelry segment (without Production) and 17.3% for the overall Group, massive decline due to state-ordered closings of at times up to 80% of distribution channels worldwide.
-Group net sales of CHF 2 197 million, -43.4% to the previous year at constant exchange rates, or -46.1% at current rates. The strong Swiss Franc reduced sales by CHF 113 million, or -4.9%.
-Operating loss of CHF -327 million compared to operating profit of CHF 547 million in the previous year.
-Return to a positive operating result in the month of June for the overall Group.
-Net loss of CHF -308 million, compared to net profit of CHF 415 million in the previous year.
-Positive operating cash flow.
-Solid equity base of CHF 10.8 billion, with an equity ratio of 84.6% and a net liquidity1)of CHF 944 million, 29% or CHF 213 million higher than the previous year.
-Very high customer demand in all price segments in markets which have already overcome the lockdown. Double-digit growth in Mainland China in May and June compared with the previous year.
-Strong second half expected, with a positive operating result for the entire year.
1) Cash and cash equivalents and marketable securities and derivative financial instruments minus current financial debts and derivative financial instruments
HALF-YEAR REPORT
Group Key Figures
at constant rates | currency effect | Total | |||
Net sales | 2 197 | 4 078 | -43.4% | -2.7% | -46.1% |
Operating result | -327 | 547 | |||
- in % of net sales | -14.9% | 13.4% | |||
Net result | -308 | 415 | |||
- in % of net sales | -14.0% | 10.2% | |||
Investments in non-current assets | 139 | 235 | |||
Equity, 30 June | 10 826 | 11 191 | |||
Market capitalization, 30 June | 9 805 | 15 176 | |||
Basic earnings per share in CHF | |||||
- Registered shares | -1.17 | 1.56 | |||
- Bearer shares | -5.87 | 7.82 |
Unaudited figures
Highlights of the first half 2020
Promising January
Swatch Group started well in 2020 and in January recorded an operating margin of 21.4% in the Watches & Jewelry segment (without Production) and 17.3% for the entire Group, despite severe weakening in China in the last week of January.
Dramatic decline as a result of country closing measures
Government Covid-19 measures imposed around the globe impacted the Group with full force as of February 2020. Complete lock-downs were introduced in most countries, which led to the forced closing of up to 80% of all retail stores worldwide at times (Group stores and third-party stores). Only e-commerce distribution was partially feasible. Production of watches, jewelry and components was reduced to a minimum, and short-time work was introduced for a significant number of employees. The Covid-19 measures have left deep marks on the half-year figures of the Group, which resulted in a half-year loss for the first time.
Streamlining of the retail network, which had already commenced in the previous year, was accelerated due to the exceptional market situation. In the first half of 2020, approximately 260 stores were definitely closed, which resulted in a significant reduction in emplo-yees abroad. The number of employees has decreased since December 2019 by 6.5% to approximately 33 700 persons. The Group achieved significant cost savings in the areas of purchasing, production, marketing, and rents. However, the areas of research and development as well as training continued unchanged.
HALF-YEAR REPORT
Ongoing sustained customer demand
Customer demand for Group products continues to be strong, both in the prestige and luxury segment as well as in the middle and lower price segment. However, this demand could not be satisfied since the majority of distribution channels worldwide were forced to close.
The following examples of a market with full lockdown (China) and a country with limited lockdown (Korea) show strong growth after the end of the lockdown period in both cases, first in the Group's retail, followed by a delay in wholesale.
China - full lockdown
Retail | Domestic Wholesale |
- Sales decline of over 80% during lockdown | - Sales decline of over 80% during lockdown |
- Immediate recovery after reopening | - Delayed recovery |
- Months of May and June more than 60% over strong previous | - Month of June above previous year |
year | |
Evolution vs. Previous Year's Month | |
2%4%3%5%9%3%4%0%8%3% |
Evolution vs. Previous Year's Month
-3% | -5% |
-22% | |
-32% | |
-60% | |
-83% | |
-86% |
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct 19
Nov19
Dec19
Jan20
Feb20
Mar 20
Apr20
May20
Jun20
Jun20
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct 19
Nov19
Dec19
Jan20
Feb20
Mar 20
Apr20
May20
HALF-YEAR REPORT | |
Korea - limited lockdown | |
Retail | Domestic Wholesale |
- Sales decrease approximately 15% after initial measures | - Sales slightly minus for one month only |
- Following month already with sales increase versus previous | - Following month already with double-digit sales increase |
year | versus previous year |
- Month of June more than 30% over previous year | - Month of June more than 30% over previous year |
Evolution vs. Previous Year's Month | Evolution vs. Previous Year's Month |
53% |
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct 19
Nov19
Dec19
Jan20
Feb20
Mar 20
Apr20
May20
Jun20
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct 19
Nov19
Dec19
Jan20
Feb20
Mar 20
Apr20
May20
Jun20
Swatch Group Korea - Total Sales Evolution vs. Previous Year's Month
34%
-10%
Apr19
May19
Jun19
Jul19
Aug19
Sep19
Oct19
Nov19
Dec19
Jan20
Feb20
Mar 20
Apr20
May20
Jun20
Outlook for the second half of 2020
The Group's management is convinced that the sales and profit situation will improve quickly in the coming months, parallel to the further easing of Covid-19 measures in the countries. The positive outlook is strengthened by the new products which will be launched in the second half of the year, as well as the lower cost base. This will lead to increased production capacity in the third and fourth quarter 2020. A positive operating result is expected for the full year.
HALF-YEAR FINANCIAL STATEMENTS
Consolidated Income Statement
100.0 | ||||
Net sales | 2 197 | 100.0 | 4 078 | |
1.5 4.8 -22.0 -32.6 -5.4 -0.5 -32.4 | ||||
Other operating income | 62 | 2.8 | 61 | |
Changes in inventories | 0 | 0.0 | 198 | |
Material purchases | -451 | -20.5 | -899 | |
Personnel expense | -1 020 | -46.4 | -1 330 | |
Depreciation and impairment on property, plant and equipment | -214 | -9.7 | -218 | |
Amortization and impairment on intangible assets | -21 | -1.0 | -22 | |
Other operating expenses | -880 | -40.1 | -1 321 | |
Operating result | -327 | -14.9 | 547 | 13.4 |
-0.0 -0.2 -0.0 | ||||
Other financial income and expense | -12 | -0.5 | -2 | |
Interest expense | -1 | -0.0 | -5 | |
Share of result from associates and joint ventures | -4 | -0.2 | -1 | |
Ordinary result | -344 | -15.6 | 539 | 13.2 |
0.0 | ||||
Non-operating result | 0 | 0.0 | 1 | |
Result before income taxes | -344 | -15.6 | 540 | 13.2 |
-3.0 | ||||
Income taxes | 36 | 1.6 | -125 | |
Net result | -308 | -14.0 | 415 | 10.2 |
Attributable to shareholders of The Swatch Group Ltd | -303 | 404 | ||
Attributable to non-controlling interests | -5 | 11 | ||
Earnings per share in CHF | ||||
Registered shares | ||||
Basic earnings per share | -1.17 | 1.56 | ||
Diluted earnings per share | -1.17 | 1.56 | ||
Bearer shares | ||||
Basic earnings per share | -5.87 | 7.82 | ||
Diluted earnings per share | -5.87 | 7.81 |
Unaudited figures
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The Swatch Group AG published this content on 14 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 July 2020 06:35:03 UTC